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Financial Planning and Forecasting Insights

Financial planning and forecasting are essential for company management to make informed economic decisions and budget effectively, utilizing historical data and current indicators. While short-term planning is generally less risky, long-term planning requires careful consideration due to its potential impact on resources and company stability. Despite inherent uncertainties, effective financial planning can provide flexibility and alternatives to maximize profits.

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26 views1 page

Financial Planning and Forecasting Insights

Financial planning and forecasting are essential for company management to make informed economic decisions and budget effectively, utilizing historical data and current indicators. While short-term planning is generally less risky, long-term planning requires careful consideration due to its potential impact on resources and company stability. Despite inherent uncertainties, effective financial planning can provide flexibility and alternatives to maximize profits.

Uploaded by

6hwtnw28hb
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

REFLECTION PAPER

Financial Planning and Forecasting

No matter how good of an accountant or mathematician you are it is impossible to predict the
future, however through the help of previous experiences and historical data, one can now
have a glimpse of possibility.

Financial planning and forecasting assist the Company’s management make economic
decisions even before completion of the year’s gures. This is crucial in making long-term
nancial decisions that can ultimately a ect the future of a company. Forecasting also assists
in determining the budget needed to support the Company’s projects and operations.
Forecasting made use of historical data, in addition to current year’s indicators to predict
movements in a company’s accounts. Planning may be short-term or long-term short-term
nancial planning includes working capital budgeting, this involves the disbursements and
cash receipts through day to day operations. Short-term planning is not often as risky as
compared to long-term planning since data used here are usually recurring and stable. On the
other hand, long-term planning requires a higher degree of cautiousness since it is often
involves signi cant amount of resources, and any potential mistakes are detrimental to the
company making it. Long-term planning involves, but not limited to capital outlay, expansion,
introduction of new product line, etc. As mentioned, long-term planning is extremely risky,
many companies nd themselves bankrupt because of poor consideration of factors related to
such. Another bene t of planning is exibility, having an idea of what could happen gives
decision-makers to consider alternatives. This will allow a company to choose the best
alternatives that will maximize its pro ts.

Financial planning and forecasting, despite not always accurate, is truly bene cial to a
company. It ensure the timeliness of information, otherwise will only be available during end of
period. Short-term and long-term planning could be used hand in hand with each other, since
each serves di erent purpose. However, forecasted gures must be viewed with a grain of salt
because uncertainties is always a possibility. In 2020, COVID19 hit the country and stopped
most of the operations of the economy, the pandemic caught many industries o -guard
resulting to unfavorable variances in their budgets and plannings. Thus, it is truly important to
have planning that is not only pro table, but also exible.

To summarize, it is important to have an understanding of the importance and weaknesses of


nancial planning, because it is one of the most important resource of a company.
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